How CD early withdrawal penalties work

By the RateHerald team · Reviewed by Tony R. on Oct 10, 2026 · Updated Oct 10, 2026

If you take money out of a CD before it matures, the bank charges a penalty, usually a set number of months of interest: often three months on a one-year CD and six to twelve on longer terms. Early in the term, the penalty can be more than the interest earned, so it comes out of your deposit.

How banks set the penalty

The bank sets its own penalty and must disclose it before you open the CD (Regulation DD). Most express it as days or months of interest on the amount withdrawn, and many scale it with the term:

Some banks charge a percentage of the amount withdrawn instead. Federal rules set a floor, not a ceiling: at least seven days’ simple interest on money withdrawn in the first six days after the deposit (Regulation D).

A worked example

$10,000 in a one-year CD at 4.00% APY earns about $33 a month. With a three-month penalty of about $100:

• Withdraw after 9 months: you’ve earned about $300, keep about $200.
• Withdraw after 1 month: you’ve earned about $33, and the remaining $67 of the penalty comes from your $10,000.

Ways around it

• No-penalty CDs let you withdraw the whole balance after the first week, usually at a lower rate.
• A CD ladder splits money across terms so part comes due every year.
• The grace period after maturity, often 7 to 10 days, is the time to withdraw or move the money without a penalty; after it, most CDs renew for the same term.

Many banks waive the penalty if the owner dies or is declared legally incompetent; the account’s disclosure says when.

Each bank’s CD page on RateHerald lists its penalty rules by term, from the bank’s own disclosure.